Back
 AJIBM  Vol.9 No.7 , July 2019
Optimal Asset Allocation for a Mean-Variance-CVaR Insurer under Regulatory Constraints
Abstract:
In this paper, we introduce the mean-variance-CVaR criteria into the study of asset allocation for insurers. Considering that the financial market consists of one risk-free asset and multiple risky assets with regulatory constraints, an optimization problem is established for an insurer with underwriting business. Based on practical financial and insurance data, an empirical study is carried out. The results show that the mean-variance-CVaR model is able to provide more potential investment strategies for an insurer. The regulatory policy released by China Insurance Regulatory Commission plays a key role in controlling investment risk for Chinese insurers.
Cite this paper: Shi, Y. , Zhao, X. and Yan, X. (2019) Optimal Asset Allocation for a Mean-Variance-CVaR Insurer under Regulatory Constraints. American Journal of Industrial and Business Management, 9, 1568-1580. doi: 10.4236/ajibm.2019.97103.
References

[1]   Kahane, Y. and Nye, D. (1975) A Portfolio Approach to the Property Liability Insurance Industry. The Journal of Risk and Insurance, 42, 570-598. https://doi.org/10.2307/252154

[2]   Krous, C.G. (1970) Portfolio Balancing Corporate Assets and Liabilities with Special Application to Insurance Management. The Journal of Financial and Quantitative Analysis, 5, 77-105.
https://doi.org/10.2307/2979008

[3]   Lambert, E.W. and Hofflander, A.E. (1966) Impact of New Multiple Line Underwriting on Investment Portfolios of Property-Liability Insurers. The Journal of Risk and Insurance, 33, 209-223. https://doi.org/10.2307/251033

[4]   Briys, E.P. (1985) Investment Portfolio Behavior of Non-Life Insurers: A Utility Analysis. Insurance: Mathematics and Economics, 4, 93-98.
https://doi.org/10.1016/0167-6687(85)90003-4

[5]   Rong, X.M., Wu, M.D. and Liu, B.Y. (2001) Research on the Unit Risk-Reture Optimization Model of Insurance Funds Investment. The Journal of Industrial Engineering and Engineering Management, 15, 40-43.

[6]   Rong, X.M. and Li, N. (2004) Research on the Optimal Investment of Insurance Funds. The Journal of Quantitative and Technical Economics, 10, 62-67.

[7]   Chen, X.H., Han, Z.Z. and Tang, K. (2006) Research on the Optimization Model of Insurance Funds Investment Based on Var and Raroc. The Journal of Quantitative and Technical Economics, 4, 111-117.

[8]   Zhao, H., Rong, X.M. and Cao, J.L. (2011) Robust Portfolio Selection Problem for an Insurer with Exponential Utility Preference. WSEAS Transactions on Mathematics, 10, 321-331.

[9]   Zhao, X., Ji, H.Y. and Shi, Y. (2018) Optimization Problem of Insurance Investment Based on Spectral Risk Measure and Raroc Criterion. Mathematical Problems in Engineering, 2018, Article ID: 9838437. https://doi.org/10.1155/2018/9838437

[10]   Guo, W.J. and Li, X.D. (2009) Optimal Portfolio Selection Bounded by Var for Insurer. Journal of Systems and Management, 18, 118-124.

[11]   Xu, Q.F., Zhou, Y.Y., Jiang, C.X., Yu, K.M. and Niu, X.F. (2016) A Large CvaR-Based Portfolio Selection Model with Weight Constraints. Economic Modelling, 59, 436-477.
https://doi.org/10.1016/j.econmod.2016.08.014

[12]   Banihashemi, S. and Navidi, S. (2017) Portfolio Performance Evaluation in Mean-CvaR Framework: A Comparison with Non-Parametric Methods Value at Risk in Mean-Var Analysis. Operations Research Perspectives, 4, 21-28. https://doi.org/10.1016/j.orp.2017.02.001

[13]   Yu, X., Sun, H.G. and Chen, G.H. (2011) The Optimal Portfolio Model Based on Mean-CvaR. Journal of Mathematical Finance, 1, 132-134. https://doi.org/10.4236/jmf.2011.13017

[14]   Artzner, P., Delbaen, F., Eber, J.M. and Heath, D. (1999) Coherent Measures of Risk. Mathematical Finance, 9, 203-228. https://doi.org/10.1111/1467-9965.00068

[15]   Roman, D., Darby-Dowman, K. and Mitra, G. (2007) Mean-Risk Models Using Two Risk Measures: A Multiobjective Approach. Quantitative Finance, 7, 443-458.
https://doi.org/10.1080/14697680701448456

[16]   Markowitz, H.M. (1952) Portfolio Selection. The Journal of Finance, 7, 77-91.
https://doi.org/10.1111/j.1540-6261.1952.tb01525.x

[17]   Elahi, Y. and Abd Aziz, M.I. (2014) China Sovereign Wealth Funds Investment Strategy Based on the Mean-Variance-CvaR. Investment Research, 4, 27-40.

[18]   Elahi, Y. and Abd Aziz, M.I. (2014) Mean-Variance-CvaR Model of Multi-Portfolio Optimization via Linear Weighted Sum Method. Mathematical Problems in Engineering, 2014, Article ID: 104064.
https://doi.org/10.1155/2014/104064

[19]   Chen, H.B. (2016) Research on Bond Portfolio Optimization of Commercial Banks-Based on Mean-Variance-CvaR Model. Journal of Finance and Economy, 5, 35-50.

[20]   Gao, J.J., Xiong, Y. and Li, D. (2016) Dynamic Mean-Risk Portfolio Selection with Multiple Risk Measures in Continuous-Time. European Journal of Operational Research, 249, 647-656.
https://doi.org/10.1016/j.ejor.2015.09.005

[21]   Rockafellar, R.T. and Uryasey, S. (2002) Conditional Value-at-Risk for General Loss Distributions. The Journal of Banking and Finance, 26, 1443-1471.
https://doi.org/10.1016/S0378-4266(02)00271-6

[22]   Rockafeller, R.T. and Uryasev, S. (2000) Optimization of Conditional Value-at-Risk. Journal of Risk, 2, 21-41. https://doi.org/10.21314/JOR.2000.038

 
 
Top